Charitable Trust Primer

If you regularly donate generously to charity, you may want to consider how structuring your charitable giving can generate immediate tax incentives for you. Properly structured charitable trusts could offer you greater flexibility and control over your intended charitable contributions while helping you fulfill your philanthropic goals, and also helping with estate planning and tax management.

Estate planning often can involve the creation of a trust- a legal entity created to hold assets for the benefit of certain persons or entities. A charitable trust allows a donor to set assets aside for one or more charities. There are two different types of charitable “split-interest” trusts—charitable remainder trusts (CRTs) and charitable lead trusts (CLTs). These types of trusts “split” the assets between a charitable and non-charitable beneficiary.

CRTs and CLTs are similar in that some of the assets go to the charity and some go to a non-charitable party of the donor’s choosing. The key difference is when the charitable and non-charitable beneficiaries receive their payments.

Charitable remainder trust (CRT) With a CRT, you donate assets to the trust, which makes at least an annual payout back to you or to another non-charitable beneficiary for the term of the trust. You choose the time period, which can be for your or someone else’s lifetime or up to a 20-year term. When that time is up, the remaining assets, as well as any appreciation generated, go to the charity or charities selected.

Charitable lead trust (CLT) A CLT is almost a mirror image of a CRT – a CLT makes the annual payout to the charity first. After a set time period, the trust terminates, and the remainder goes to a non-charitable beneficiary, like a family member or family trust.

Charitable Trusts offer a number of benefits:

1) Preserving the value of highly appreciated assets

2) Income tax deductions

3) Reducing estate taxes

4) Creating income from non-income-producing property

When properly structured, both the donor and the charity can be beneficiaries of one’s charitable tendencies. If you or someone you know have questions about structuring your estate plan or think a trust might further your goals, please contact attorney Sarah Geltz of the Kendrick Law Group for a complementary consultation 407-641-5847.